The 409A Valuation Question Every Founder Gets Wrong

Why it matters

A 409A valuation sets the strike price for your option grants. Get it wrong — or skip it — and you hand employees a tax bill and dilution headaches. Get it cheap, and you may be getting a valuation that won't survive scrutiny.

What actually drives the number

• Enterprise value implied by your last priced round
• Discounts for lack of marketability and minority status
• Recent financial performance versus the assumptions in the round model
• Time elapsed since the last financing

The practical rule

Refresh the valuation after any material event — a new round, a big contract, a pivot — and use an independent provider who'll stand behind the methodology. The goal isn't the lowest possible strike price; it's a strike price that's defensible if anyone ever asks.